GM Europe's Sales Fall 20% in Q2; Opel Takeover Looks Set to Drag On

General Motors (GM) has announced its sales figures in Europe for the second quarter of the 2009 calendar year. In a company press release GM said that it sold a combined total of 471,823 units during the period, a 20% year-on-year (y/y) fall, equating to a 9.2% share of the market. With GM stating that the combined European market fell by 18% during the period, the sales decline marginally underperformed the overall market, although this result was in reality relatively robust given the uncertainty surrounding the unit during the period as a result of the ongoing sale process at Opel and the fact that Saab remains in bankruptcy protection in Sweden. In brand terms Opel/Vauxhall sales accounted for 347,330 units of this total, equating to a 6.9% share of the overall European market. The Opel brand was boosted by very strong sales in Germany as a result of the scrappage incentive programme there, its sales rising by 45% and helping to make the second quarter the best sales quarter for Opel since 2000, while the Opel Corsa was the best-selling B-segment model in Germany during the period, outperforming the Volkswagen (VW) Polo. The Chevrolet brand contributed positively to GM Europe's sales in the quarter, selling 115,526 units, equating to a record market share of 2.3%. This included a 43% y/y uplift in Germany, a 102% y/y increase in France, and a 120% rise in Turkey.

Commenting on the company's second-quarter sales performance, Brent Dewer, GM Europe's vice-president of sales, marketing, and aftersales, said, "While it will probably take some years for the industry to return to 2007 levels, as we are facing an unprecedented set of economic challenges due to the global economic crisis, we are working intensively with our retail network to fight for every sale and to successfully manage the business during this challenging period." He added that the unit's prospects will be boosted in the second half of 2009 by new products: "We have a host of new products—including the Opel Insignia, the European Car of the Year 2009, and the Chevrolet Cruze. We will keep managing our production and costs as tightly as possible, while communicating our strong product message in the marketplace."

However, although there is no doubt that GM Europe has some compelling new products due to appear in showrooms, not least the new Opel/Vauxhall Astra, which will appear across Europe in the fourth quarter, the company still faces significant challenges, not least of which is finalising a new ownership structure. Magna remains the favourite to complete a deal to acquire a controlling interest in Opel with its Russian partners Sberbank and GAZ, although the initial timetable outlined by the company's co-chief executive Siegfried Wolf to draft a contract by 15 July now looks unrealistic. With GM's biggest shareholder following its reorganisation being the U.S. Treasury, and with the German government providing up to 4.5 billion euro (US$) in loan guarantees for the enterprise, the agreement of these governments is absolutely key to a deal being struck. However, an Opel source told the Financial Times (FT) that, "Even when GM and Magna reach an agreement, the Task Force and the other independent parties would want time to examine it. I could imagine a signing maybe in the 30th calendar week, which starts on Monday, July 20."

However, the main current sticking point to completing a deal with Magna remains the issue of Opel's vehicle technology and how Magna can use it. The Russian government reportedly wants its domestic carmakers to have access to Opel's vehicle technology, including prime assets such as the Epsilon II and Delta II platforms. However, the source confirmed that GM is not interested in giving away such prime asset to the Russians, or anyone for that matter. Instead it appears that a licensing deal will be struck that strictly defines the way Magna can use GM's vehicle technology and protects GM's ownership rights. The Chinese carmaker Beijing Automotive Industry Corporation (BAIC) is still very much in the background with its rival offer (see Europe: 8 July 2009: BAIC Bid for Opel to Cut 7,000 European Jobs and Promote Sales Drive in China), which requires substantially less in the way of loan guarantees from the German government. However, the BAIC bid has received an extremely lukewarm response from politicians and union leaders in Germany, despite the potentially lower cost to the German taxpayer. Doubts have also been raised over BAIC's ability to gain approval from the Chinese government to complete the takeover. It would also mean that GM would own an indirect minority stake in Opel China that could complicate its Chinese joint venture (JV) with Shanghai Automotive Industry Corporation (SAIC) in Shanghai.

Outlook and Implications

In light of the uncertainty over the company's future and the fact that some of its main model offerings are coming to the end of their model cycle—such as the Opel/Vauxhall Astra—the sales performance of GM's European operations in the second quarter of 2009 was actually reasonably robust. The drop in sales of 20% to 471,823 units was only just worse than the decline in the overall European market of 18% according to Opel's figures, and the company has also been one of the main beneficiaries of the scrappage incentive in Germany, which helped boost the company's sales there by 45% during the quarter. This is perhaps surprising given the huge amount of publicity in Germany given over to the uncertainty currently surrounding the company's future ownership structure. What is becoming clear with regards to the deal to secure Opel and Vauxhall's future is the massively complex conflicts of interest that must be overcome before a deal can be successfully completed. With the BAIC bid included there are potentially four different national governments that must be appeased for a deal to be completed, with the German, U.S., Russian, and Chinese administrations all potentially helping to make the decision that will frame Opel and Vauxhall's future. This is not to mention the small matter of the powerful German unions, the German state politicians, and, of course, GM's management.